Walgreen Co. and Express Scripts Inc. (ESI) have signed a multiyear pharmacy network agreement under which the nation’s largest drug chain will rejoin the broadest Express Scripts retail pharmacy network available to new and existing ESI clients.

Walgreens, Express Scripts sign new deal

July 19th, 2012

DEERFIELD, Ill. – Walgreen Co. and Express Scripts Inc. (ESI) have signed a multiyear pharmacy network agreement under which the nation’s largest drug chain will rejoin the broadest Express Scripts retail pharmacy network available to new and existing ESI clients.

Walgreens decided not to renew its contract with ESI in January, contending that the reimbursement rates offered by the pharmacy benefits manager (PBM) were inadequate.

During the ensuing six-and-a-half-month standoff Walgreens saw its overall top line, its pharmacy sales and its prescription counts fall. According to the drug chain, about 10% of its pharmacy business, totaling approximately 88 million prescriptions, came from members of the ESI network. Walgreens’ primary competitors, CVS Caremark Corp. and Rite Aid Corp., benefited from the dispute, seeing significant gains in their pharmacy business from ESI network members.

Effective September 15, however, Walgreens will once again be part of that network. The challenge for the retailer will be to win back the prescription customers who dropped it for alternative pharmacies.

For its part, the PBM will work to ensure a smooth transition for those plan sponsors that want to include Walgreens pharmacies in their network.

"As I’ve said, we are in the business of providing a broad range of pharmacy, health and wellness services to help meet the needs of all of our customers," said Greg Wasson, Walgreens’ president and chief executive officer. "I am pleased that Walgreens and Express Scripts have been able to reach an agreement that works for both parties and is consistent with our company’s principles. This agreement is good for our shareholders, our employees and the patients and communities we serve every day. We look forward to once again filling prescriptions and offering our health and wellness services as part of the Express Scripts network."

"We are happy to include Walgreens in our broadest network of pharmacies, and we are pleased to reach an agreement to do so," noted George Paz, chairman and CEO of Express Scripts. "Our business model is based on strong alignment with our plan sponsors — employers, health plans, unions and government health programs — providing them with a clinically sound and economically responsible pharmacy benefit."

According to an Express Scripts spokesman, the PBM’s broadest network now offers more than 64,000 pharmacies nationwide, including Walgreens, providing a broad array of quality pharmacy care options.

In morning trading, Walgreens’ share price gained more than 11% to $34.54, while rival CVS slipped about 4% to $46.51 per share.